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Two Wheeler Loan

Two-Wheeler Loan – All Your Questions Answered

In developing countries like India, two-wheelers are a popular means of transport. On any given street in the country, two-wheelers; motorbikes and scooters to be specific, have a real presence. This is because many Indians depend on motorbikes and scooters to get around. This includes young executives for whom buying a motorbike is often a preliminary purchase before owning a four-wheeler. Owing to the popularity of scooters and motorbikes and a very real market need for two-wheelers, many banks and NBFCs specialize in two-wheeler loans. As such, the motivation for this article is to answer any questions pertaining to two-wheeler loans and to provide current and factual information on the subject. Read further for answers to a wide range of queries on the subject of two-wheeler loans.

What are Two-wheeler Loans?

Two-wheeler loans are secured and unsecured loans for the specific purpose of financing the purchase of scooters and motorbikes. Numerous banks and NBFCs in India specialize in two-wheeler loans, that allow consumers to purchase scooters and motorbikes on credit, with repayments made in the form of monthly EMIs inclusive of interest charged. These loan amounts range from 40,000 INR to 1 Lakh or more, for the express purpose of buying scooters and motorbikes of varying makes and models. Two-wheeler loans are popular among the youth demographic in India; comprised of individuals within the age range of 18 to 25 years.

What are the Interest Rates and Processing Charges for Two-Wheeler Loans?

Like all loans, two-wheeler loans also come with interest to be paid by the borrower, in addition to the loan amount, and a minimal processing charge that is deducted from the total loan amount. As is common, most banks and NBFCs in the country have varying interest rates and processing charges. However, the interest rates mostly vary between 11% to 18% p.a. Apart from interest incurred on the loan amount, it is important for two-wheeler loan applicants to consider processing charges and other fees that may apply, to form a complete picture of what a two-wheeler loan looks like in terms of long-term costs incurred. It is also important to note that the interest charged on a two-wheeler loan often depends upon whether a borrower is opting for a secured loan or an unsecured loan alongside other factors.

What is a secured two-wheeler loan?

When a borrower offers up collateral to bolster a two-wheeler loan, it is known as a secured loan. Bearing in mind that the lender is secured against payment defaults owing to the collateral offered by the borrower; secured two-wheeler loans come with lower interest rates.

What are unsecured two-wheeler loans?

An unsecured two-wheeler loan is a loan offered to the borrower to purchase a motorbike or a scooter without collateral. As the lender has no security against defaulting payments; the interest rates on unsecured two-wheeler loans are often higher as compared to secured two-wheeler loans.

Am I eligible for a two-wheeler loan?

The query above is common among those considering applying for a two-wheeler loan. This is a legitimate query as banks and NBFCs have strict guidelines for lending and do not lend money rampantly. This is where the need to meet eligibility criteria comes in, as lenders need to ensure repayment of loans. For those hoping to avail of two-wheeler loans in the near future, the eligibility criteria as indicated in the infographic below must be met.


Eligibility Criteria


18 to 65

Borrower’s Employment Status

Salaried and Self-Employed

Borrower’s Employment Tenure

6 Months or More

Monthly Income

20,000 p.m. or More

Residential Status

Must have Permanent Residence Proof

What other charges are applicable to two-wheeler loans?

While it is common knowledge that a borrower is expected to pay interest and a processing fee on the loan amount, there are multiple miscellaneous charges that may or may not apply. These charges are as listed below.

  • Processing Charge – This charge ranges from 0.50% to 5% of the loan amount which often amounts to anything between Rs. 500 to Rs. 5000.
  • Prepayment Fee – if a borrower wishes to pay the entire loan amount in advance or in other words foreclose a loan, he or she is liable to pay a prepayment or foreclosure fee.
  • Late Payment Fee – the event an EMI payment has been delayed owing to lack of funds in the borrower's account, a late payment fee is applicable. This is a form of penalty that often amounts to a few hundred rupees.

What are the factors that affect my two-wheeler loan interest rates?

This a common question among many borrowers, especially when they realize that they are paying higher or lower interest rates on two-wheeler loans in comparison with others. It must be noted that various factors have an impact on two-wheeler loan interest rates, on a case by case basis. These factors are as listed below.

  • Vehicle Price – as the prices of various two-wheeler makes and models differ, banks and NBFCs are willing to finance two-wheeler purchases for borrowers at varying interest rates. The price of the two-wheeler does have an impact on interest rates.
  • Employment Type – An individual's income source has an impact on two-wheeler interest rates. Those with a secure source of income (salaried individuals) pay lower interest rates when compared to those that are self-employed.
  • Income Range – Those with a higher income range end up paying lower interest rates as they can offer banks and NBFCs greater loan repayment security. It may not be the same for those earning a lower pay package.

What are the benefits of taking out a two-wheeler loan?

For many individuals, the financial benefits of a two-wheeler loan come into question; especially when an individual can self-finance his or her purchase. Even so, there are tangible benefits to availing of a two-wheeler loan and they are as listed below.

  • Two-wheeler loans facilitate a two-wheeler purchase by accounting for up to 90% of the cost of the vehicle including other charges.
  • Bearing in mind that two-wheelers are expensive commodities, a self-financed two-wheeler purchase can deplete an individual's savings, which in turn is a risky undertaking. A two-wheeler loan allows an individual to make a two-wheeler purchase without emptying out his or her savings.
  • The loan amount often accounts for insurance, registration and even accessories.
  • Two-wheeler loans are easily available at any local automobile dealership.
  • Minimum documentation is one of multiple two-wheeler loan advantages.
  • Flexible payment options ensure that repaying the loan amount is as easy as possible.
  • Many banks and NBFCs offer two-wheeler loans without repayment charges or foreclosure fees.

What is the documentation required for two-wheeler loans?

While two-wheeler loans are largely hassle-free, minimal documentation is required. This may include...

  • A Government Issued ID Proof (Pan Card, Voters ID, Aadhaar Card)
  • Address Proof (Voters ID, Aadhaar Card, Rent Agreement)
  • Salary Slips for 3 to 6 Months
  • Employment Proof
  • Income proof for those that are Self-Employed
  • Bank Statements for 3 to 6 Months

In conclusion, two-wheeler loans are an advantageous option for those looking to acquire a two-wheeler in the near future. Owing to the easy availability of two-wheeler loans and the easy repayment options, these loans are ideal for those at entry level jobs or even students. As intended, this article provides all the information one needs to make an informed decision before applying for a two-wheeler loan.


0.50% to 5% of the loan amount

Hidden Cost


Bank Interest Rate Minimum Age (in yrs.) Minimum Income (in Rs.)
Allahabad Bank
Allahabad Bank
11.80% 21 to 60 years minimum Rs. 1.8 Lakh
Andhra Bank
Andhra Bank
10.45% - 10.70% 21 to 60 years minimum Rs. 60,000
Bank of India
Bank of India
Starting from 9.35% 21 to 65 years Regular Income
Yes Bank
Yes Bank
Starting from 9.99% Min. 21 years, Max. 65 years NA
Disclaimer: The Details shown may be different from actual. Please confirm on the bank site before process.